Q. I’ve been an IRO at a mid-cap UK firm for just three months now. My problem is that my predecessor seems to have been less than frank with investors. Now I have to deal with their distrust. Help!
A. Oh dear, let’s just hope you’ve been better brought up – and your shareholders are forgiving. If the market has been misled then that’s an offence, and you will have to go to great lengths to regain trust.
Whatever jurisdiction you’re in, once a certain line has been crossed, things have to be put right. So come clean with investors by drafting a carefully worded statement of correction or some kind of brief that reaches everyone at the same time – anything you can to put the record straight
Once a negative impression like this has been made, the only way to dispel investors’ mistrust is to show them you’re doing everything you possibly can to be transparent and truthful from now on.
Remember the golden rules about maintaining investor trust: never tell them anything that misleads them in any way or that manages their expectations wrongly, and always deliver – say what you’re going to do and then do it.
Q. Given that it’s not yet a legal requirement in the UK, my company has decided that we aren’t going to expense options. How on earth do I explain this to our investors?
A. It’s time to take a page out of Pontius Pilate’s book – wash your hands. More to the point, why exactly are you so worried about explaining something that wasn’t your decision in the first place?
The first thing you need to do is ask your finance director why you’re not doing it, so you’ll be ready to quote him verbatim. Make sure you write it all down so you can give it back to him to check and make sure you’re presenting his position and his thought process entirely. You can then use that page as a cheat sheet when you’re briefing investors.
Remember, your job is to inform, not justify the decisions of executives.
Q. According to the latest IR Magazine Awards Research Report, US investors don’t believe Sarbanes-Oxley rules go far enough to instill boardroom transparency, and that further rules are needed. What further rules do you think could be in store?
A. Well that’s hard to say, isn’t it? For a general feel of where governance issues are going, I suggest reading some of the UK’s Higgs review on boards (check out www.dti.gov.uk/cld/non_exec_review/pdfs/higgsreport.pdf). Many of its proposals are on the verge of becoming best practice.
I also encourage you to read the editorial that was in the Economist over Easter weekend. What may be in store is not necessarily more legal requirements but greater activism from institutional investors – ultimately, that’s what will make the difference.
Q. Our IR department recently won one of IR magazine’s awards for the first time ever. In your honest opinion, does our company or our IR team stand to gain any sort of brand halo with investors or analysts? Or should we just keep quiet about it?
A. One unemployed IRO got five job offers after winning best M&A IR. Other IR teams have bonuses based partly on their performance in the IR Magazine Awards survey. Analysts and fund managers are starting to expect – and even enjoy – the annual survey. And more and more equities research departments are ordering the Research Reports for their libraries. Nobody likes a show-off, but with transparency actually becoming a real valuation metric, blow that trumpet!
E-mail questions to Heather McGregor – [email protected]. McGregor is a former IRO and investment analyst who currently works on IR assignments for Taylor:Bennett, an executive search firm specializing in communications jobs
